New Michelle’s Law Extends Coverage for Dependent College Students

In another federal coverage mandate, employer health plans and group health insurers will be required to continue coverage for one year for any dependent college student who would otherwise lose coverage due to a medically necessary leave of absence under an amendment to the Employee Retirement Income Security Act (ERISA) that was signed by President George W. Bush on October 9. 

Dubbed ”Michelle’s Law” after a college student diagnosed with cancer who opted to continue her studies on a full-time basis against her doctor’s wishes so that she would not lose dependent status under her health plan, the law takes effect for plan years starting on or after October 9, 2009 – meaning January 1, 2010, for calendar year plans.  The law will apply to leaves beginning in that year.

While the law does not require an employer plan to provide coverage to dependents, if the plan does provide dependent coverage and conditions that coverage upon full-time student status, then the plan may not terminate the dependent’s coverage when the dependent ceases to meet the full-time student criteria due to a medically necessary leave of absence.  Instead, the plan must permit students who lose full-time status to continue coverage for a limited period of time if the dependent incurs a medically necessary leave of absence from college.  The law precludes the employer from terminating the coverage until one year after the first day of the student’s medically necessary leave of absence, or the date the coverage would have otherwise ended, if earlier.  
 
The trigger for the coverage extension is any “medically necessary leave of absence,” which includes both an actual leave of absence from the postsecondary educational institution, as well as any other change in enrollment at the institution that: (1) begins while the student is suffering from a serious illness or injury; (2) is medically necessary; and (3) causes the loss of student status under the terms of the health plan or insurance coverage.  In this context, the plan’s definition of “medically necessary” is not applied.  Instead, a leave of absence is deemed “medically necessary” only if the health plan or insurance company receives written certification from the student’s treating physician stating that the student is suffering from a serious illness or injury and that the leave of absence or change in enrollment is medically necessary.

 The statute defines a “postsecondary educational institution” as an institution of higher education as defined in Section 102 of the Higher Education Act of 1965.  This broad definition generally includes not only public and private institutions offering two and four year degree programs, but also many occupational education and postsecondary vocational programs, and in limited cases, comparable institutions outside the United States.  As a result, plans that extend coverage upon the condition of full-time student status to dependents in educational programs other than those seeking a traditional four year college degree will need to consult this statute to determine whether the plan must provide the coverage extension to students in these programs who take a medically necessary leave of absence.
 
This coverage extension does not replace or run concurrent with coverage under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA).  The dependent would still have a right to elect to continue coverage through COBRA at his or her own cost for up to 36 months after the date that he or she loses coverage due to the change in dependent status.  What this law does, however, is postpone that loss of coverage date for up to one year, giving a dependent who is a part-time student or who ceases to be a student at all an additional year of coverage at the normal dependent coverage rate, before the dependent must shift to COBRA.  

Although the law only entitles a dependent to the same benefits available to full-time students, it clarifies that any change in health insurance coverage, insurer, or funding for the coverage that occurs while the student is on a medically necessary leave of absence must continue to cover the dependent.  For example, if the employer’s plan is fully-insured and changes insurers or changes to a self-funded plan while the dependent is in the middle of a medically necessary leave of absence, the new coverage must continue to cover the dependent, as long as the new coverage provides dependent coverage to similarly situated dependents who are not on a medically necessary leave of absence.
 
The law requires plans to include a description of the terms of this new coverage along with any notice regarding a requirement that the dependent provide certification of student status in order to remain covered under the plan.  As a result, employers should amend their health plan documents to redefine “dependent” to include a full-time student whose student status changes due to a medically necessary leave of absence, as well as to clarify the coverage termination dates in these circumstances.  Employers also should revise their summary plan descriptions (SPDs) to provide for this coverage and review their dependent eligibility certification process to include a description of this new coverage and to properly administer this change.  

Note: This article was published in the October 14, 2008 issue of the Benefits eAuthority.